There are some seriously crazy figures being thrown around about the connected car market. The biggest consulting firms and financial analysts estimate that it will be worth $500 billion by 2025 (compared to an automotive industry valued at $2,000 billion in 2016)* – an enormous ratio. What does “connected cars” actually mean? There are many different types of applications, including everything from a simple GPS and infotainment to extending one’s house with a new living room space, and even personalised smart driving.

Drivers are more interested than ever in vehicles that are highly connected to their personal ecosystems, though they are not ready to pay for extra services which should be part of manufacturers’ offers. The numbers are there: 59% of European buyers indicate that connected services and equipment influenced their path to purchase. These new services are today built around several promises:

Decreased household costs, including lower rates for maintenance contracts and insurance policies, thanks to decreased likelihood of accidents (usage-based insurance with “Pay how you drive” rates);

Better quality of life in-car, thanks to social media connectivity and access to publishers’ catalogues (Tesla’s Spotify capabilities, for example);

Better daily time management, with in-car services that save time and make the user experience more seamless than ever before. For example, front seat e-payment at the petrol station (underway in the UK for Jaguar and Shell), or even workplace access (such as Renault integrating Microsoft with an Office 365 or Outlook interface);

Easy access to smartphone interface, which might soon become a requirement if manufacturers don’t want to be eclipsed by pure players’ operating systems (such as iOS and Android) in the future. For instance, SEAT is the first European manufacturer to be compatible with the Play Store’s Android Auto app;

Lesser impact on the environment thanks to driving analysis and optimised trip planning.

These different services give a taste of just how high expectations are when it comes to added value services. All these services, of course, incur development and maintenance costs, which manufacturers must control and fund.

This poses a major challenge to car manufacturers: how can these extra services be included, without additional costs for the end-user? This could be compared to the cost of new security norms (pedestrian impact, Euro6…), which have a relatively low impact on the final price compared to their actual cost.

Manufacturers must learn to properly exploit driver data in order to balance the books. There are several ways they can do this:

But the most likely and realistic source of income is the better knowledge of the manufacturers’ own clients themselves, as well as dependable predictions on future purchasing behaviour. This honed knowledge opens the door to upselling and cross-selling strategies, with for example:

Changing vehicle selection depending on its daily use: for example, electric cars for consumers who travel great distances, live in or close to an urban area with charging stations;

Selling accessories if a heavy load or prematurely worn tyres are detected;

Selling financing agreements and guarantee extensions.

The full range of data-related challenges would be incomplete without regulatory concerns. In addition to demanding more connected services without a price hike (“more for less”), consumers are also asking for better-protected personal data. This paradox brings the EU’s new regulation about data protection – the General Data Protection Regulation, applicable from May 24, 2018 – into the spotlight. The
GDPR will give consumers more rights, and simultaneously increase advertisers’ obligations regarding consent, storage, and use of personal data.

In this context, the challenge for manufacturers is to show the added value of connected services and gain consumer trust, in order to convince them to accept reasonable and legitimate use of their data.

In conclusion, though the connected car market seems extremely promising, both in terms of business opportunities and new services for drivers, its implementation seems to be seriously complex. The cornerstone to its success will likely be manufacturers’ abilities to legally monetise data.